Document Number
Tax Type
Retail Sales and Use Tax
Application of sales and use taxes; Out-of-state catalog retailer.
Taxability of Persons and Transactions
Date Issued
April9, 1998


This will rely to your letter in which you request a ruling on behalf of your client, ***** (the Taxpayer).


The Taxpayer is a retailer of tangible personal property and operates retail stores throughout the country, including Virginia. In addition, the Taxpayer solicits sales in Virginia on a regular basis through catalogs and similar promotional mailings that are sent directly to consumers or via the Internet. All orders are accepted at the Taxpayer's mail order division outside Virginia and are delivered to customers by common carrier or electronically via the Internet. The Taxpayer is currently registered with the department for both sales and use tax and corporate income tax.

Based on the information provided, the Taxpayer sold its direct sales division May 1996 and plans to close all retail stores in Virginia in March 1998. The retail stores have various lease termination dates, some which extend to April 2001. The Taxpayer is currently negotiating with the lessor to reach a mutually acceptable settlement with respect to the lease termination of the retail stores.

Because the Taxpayer believes that it will no longer have nexus in Virginia after the closure of its retail stores in March 1998, it will terminate its Virginia sales and use tax registration upon filing its final sales and use tax return for the period March 1998.

In addition, the Taxpayer will file a final income tax return with Virginia for the fiscal year ending March 1998. The Taxpayer requests confirmation of this status in Virginia for both Virginia sales and use tax and corporate income tax purposes.


Retail Sales and Use Tax: Under Code of Virginia Sec. 58.1-612, the sales tax is collectible from all persons who are dealers and who have sufficient contact with Virginia to require registration under Code of Virginia Sec. 58.1-613.

Code of Virginia Sec. 58.1-612 defines ``dealer' to include every person who ``sells at retail, or who offers to sell at retail, or who has in his possession for sale at retail, or for use, consumption, or distribution, or for storage to be used or consumed in the Commonwealth, tangible personal property.

Based on the information provided, subsequent to closing its retail stores March 1998, the Taxpayer will continue to solicit business in Virginia by direct mail and the Internet and will make retail sales and ship the merchandise by mail or common carrier to Virginia customers. As such, the Taxpayer qualifies as a dealer under the statute.

Code of Virginia Sec. 58.1-612 also sets forth the ``nexus' requirements which give the Commonwealth the authority to require dealers to register for collection and remittance of sales tax. Based on the information provided, the Taxpayer will not have sufficient activity in Virginia to require it to collect the tax. If the Vendor's activities exceed those described in the letter, it may be required to register for collection and remittance of the sales tax under Code of Virginia Sec. 58.1-613.

Corporation Income Tax: Every taxpayer having income from Virginia sources is subject to the Virginia income tax. A taxpayer will have income from Virginia sources when sales are made to customers located in Virginia. However, Public Law (P.L.) 86-272 (15 U.S.C.A. Secs. 381=384) prohibits a state from imposing a net income tax where the only contacts with the state are a narrowly defined set of activities constituting solicitation of orders for sales of tangible personal property. Based on the information presented, the Taxpayer's activities subsequent to closure of all its retail stores in Virginia do not go beyond the provisions of P.L. 86-272, and are not subject to the corporate income tax.

Conclusion: This ruling is based on the facts presented. Any change in facts may render this ruling invalid. If you have any questions regarding this ruling, you may contact ***** in my Office of Tax Policy at *****.

Last Updated 08/25/2014 16:46